US regulator reports rising number of flawed audits
New York | US regulators have seen a jump in the number of flawed audits carried out by global accounting firms, according to figures released on Monday night (Tuesday AEST) that point to the difficulties of high staff turnover and hybrid work.
There are issues with the audit quality of the big four firms, according to the PCAOB. Les Hewitt
The Public Company Accounting Oversight Board said that its inspectors found deficiencies in 30 per cent of audits carried out by the US businesses of the global network firms – the big four of Deloitte, PwC, KPMG and EY, plus Grant Thornton and BDO – last year. That was up from 21 per cent of audits inspected in 2021.
There was an even bigger increase in failures in the work of the firms’ non-US businesses, where the deficiency rate rose to 31 per cent from 17 per cent.
“Although we do not perform analyses to determine the root causes of the deficiencies our inspectors identify, many firms do,” the PCAOB said in a report. “Certain firms have indicated that this deterioration of audit quality may in part be attributable to higher-than-normal staff turnover, use of less experienced staff in general, and the ongoing impact of COVID-19 and related remote work.”
The PCAOB has the power to inspect the audit of any company listed in the US, regardless of where its auditor is based. It said it had reviewed 710 audits last year as it stepped up its work to enforce US standards.
The report was released after the Australian corporate watchdog, the Australian Securities and Investments Commission, scrapped its annual report card about the audit quality of major Australian firms. ASIC conducted about 15 reviews of high-risk audits in 2022-23, a third of the 45 conducted the year prior.
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